United Kingdom House of Lords Decisions

Parliamentary Archives,
HL/PO/JU/18/246

Leigh and Sillavan Limited (Appellants)

v.

Aliakraon Shipping Company Limited (Respondents)

JUDGMENT

Die Jovis 24° Aprilis 1986

Upon Report from the Appellate Committee to whom was
referred the Cause Leigh & Sillavan Limited against Aliakmon
Shipping Company Limited, That the Committee had heard
Counsel on Tuesday the 11th, Wednesday the 12th, Thursday the
13th, Monday the 17th, Tuesday the 18th, Wednesday the 19th,
Thursday the 20th and Monday the 24th days of February last
upon the Petition and Appeal of Leigh and Sillavan Limited,
of Knights' Pool, Windmill Street, Macclesfield, Cheshire,
praying that the matter of the Order set forth in the
Schedule thereto, namely an Order of Her Majesty's Court of
Appeal of 7th December 1984, might be reviewed before Her
Majesty the Queen in Her Court of Parliament and that the
said Order might be reversed, varied or altered or that the
Petitioners might have such other relief in the premises as
to Her Majesty the Queen in Her Court of Parliament might
seem meet; as upon the case of Aliakmon Shipping Company
Limited lodged in answer to the said appeal; and due
consideration had this day of what was offered on either side
in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and
Temporal in the Court of Parliament of Her Majesty the Queen
assembled, That the said Order of Her Majesty's Court of
Appeal (Civil Division) of 7th December 1984 complained of in
the said Appeal be, and the same is hereby, Affirmed and that
the said Petition and Appeal be, and the same is hereby,
dismissed this House: And it is further Ordered, That the
Appellants do pay or cause to be paid to the said Respondents
the Costs incurred by them in respect of the said Appeal, the
amount thereof to be certified by the Clerk of the
Parliaments if not agreed between the parties.

Cler: Parliamentor




Judgment: 24.4.86

HOUSE OF LORDS

LEIGH AND SILLAVAN LIMITED
(APPELLANTS)

v.

ALIAKMON SHIPPING COMPANY LIMITED
(RESPONDENTS)

Lord Keith of Kinkel
Lord Brandon of Oakbrook
Lord Brightman
Lord Griffiths
Lord Ackner




LORD KEITH OF KINKEL

My Lords,

My noble and learned friend, Lord Brandon of Oakbrook, is

to deliver a speech setting out the reasons for which in his view

this appeal should be dismissed. I agree entirely with his

reasoning and conclusions, and would dismiss the appeal
accordingly.

LORD BRANDON OF OAKBROOK

My Lords,

This appeal arises in an action in the Commercial Court in
which the appellants, who were the c. and f. buyers of goods
carried in the respondents' ship, the Aliakmon claim damages
against the latter for damage done to such goods at a time when
the risk, but not yet the legal property in them, had passed to the
appellants. The main question to be determined is whether, in the
circumstances just stated, the respondents owed a duty of care in
tort to the appellants in respect of the carriage of such goods;
and, if so, whether and to what extent such duty was qualified by
the terms of the bill of lading under which the goods were
carried.

The appellants' claim was put forward originally in both
contract and tort. Staughton J. at first instance gave judgment
for the plaintiffs on their claim in contract, so making it
unnecessary for him to reach a decision on their further claim in
tort. However, on appeal by the respondents to the Court of
Appeal (Sir John Donaldson M.R. and Oliver and Goff L.JJ.), that
court set aside the judgment of Staughton J. and dismissed the
appellants' claims in both contract and tort. Sir John Donaldson
M.R. and Oliver L.3. (as he then was) rejected the claim in tort
on the ground that the respondents did not at the material time
owe any duty of care to the appellants. Goff L.J. (as he then
was) rejected the claim in tort on the ground that, although the
respondents owed a duty of care to the appellants, they had not,
on the facts, committed any breach of that duty. The judgment
of Staughton J. is reported in [1983] 1 Lloyd's Rep. 203 and that
of the Court of Appeal in [1985] 2 W.L.R. 289.

My Lords, the facts relating to what I have called the main
question to be determined are unusual and need to be set out with
some particularity. By a contract of sale made in July 1976 the
appellants ("the buyers") agreed to buy from Kinsho-Mataichi
Corporation ("the sellers") a quantity of steel coils ("the goods") to
be shipped from Korea to Immingham on c. and f. terms, free out
Immingham. The price of the goods was to be paid by a 180 day
bill of exchange to be endorsed by the buyers' bank in return for
a bill of lading relating to the goods. The buyers, who were
traders in steel rather than users of it, intended to finance the
transaction by making a contract for the re-sale of the goods to
sub-buyers before the bill of lading was tendered by the sellers.

The goods were loaded on board the "Aliakmon" ("the ship")
at Inchon in South Korea and a bill of lading dated 14 September
1976 was issued, in respect of them. The bill of lading showed the
carrying ship as the "Aliakmon"; the shippers as Illsen Steel Co.
Ltd; the port of shipment as Inchon; the port of discharge as
Immingham; and the consignees as the buyers. It is to be inferred
that Illsen Steel Co. Ltd., in shipping the goods, were acting as
agents for the sellers. The bill of lading further expressly
incorporated the Hague Rules.

The buyers later found themselves unable to make the
contract for the re-sale of the goods which they had intended to
make with the result that their bank declined to back the bill of
exchange by which payment for the goods was to be made. In
this situation representatives of the buyers and the sellers met on
7 October 1976 in an effort to find a solution to the problem.
Following that meeting the sellers sent the bill of lading to the
buyers under cover of a letter dated 11 October 1976, and receipt
of these was acknowledged by the buyers by a letter dated 18
October 1976. The Court of Appeal has held, and the buyers now
accept, that the effect of the letters so exchanged was to vary
the original contract of sale in the following respects. First, the
sellers, despite delivery of the bill of lading to the buyers, were
to reserve the right of disposal of the goods represented by it.
Secondly, while the buyers were to present the bill of lading to
the ship at Immingham and take delivery of the goods there, they
were to do so, not as principals on their own account, but solely
as agents for the sellers. Thirdly, after the goods had been
discharged, they were to be stored in a covered warehouse to the
sole order of the sellers.

On arrival of the ship at Immingham the buyers duly carried
out the terms of the contract of sale as varied in the manner
described above. On discharge of the goods they proved to be in
a damaged condition. Staughton J. found, and his finding has not
been challenged, that a substantial part of this damage, but not
all, has been caused by improper stowage of the goods in two
respects: first, the stowage of steel and timber in the same
compartment, resulting in condensation from the timber causing
rusting of the steel; and, secondly, overstowage of the goods in
such a way as to cause crushing of them. He further assessed the



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amount of damage at £83,006.07, a figure which is likewise not in
dispute.

The buyers subsequently paid the price of the goods to the
sellers, after certain claims for alleged defects in them had been
settled. The result of this was that the legal ownership of the
goods, which had until then remained in the sellers by reason of
their reservation of the right of disposal of them, finally passed to
the buyers.

My Lords, under the usual kind of c.i.f. or c. and f.
contract of sale, the risk in the goods passes from the seller to
the buyer on shipment, as is exemplified by the obligation of the
buyer to take up and pay for the shipping documents even though
the goods may already have suffered damage or loss during their
carriage by sea. The property in the goods, however, does not
pass until the buyer takes up and pays for the shipping documents.
Those include a bill of lading relating to the goods which has been
endorsed by the seller in favour of the buyer. By acquiring the
bill of lading so endorsed the buyer becomes a person to whom the
property in the goods has passed upon or by reason of such
endorsement, and so, by virtue of section 1 of the Bills of Lading
Act 1855, has vested in him all the rights of suit, and is subject
to the same liabilities in respect of the goods, as if the contract
contained in the bill of lading had been made with him.

In terms of the present case this means that, if the buyers
had completed the c. and f. contract in the manner intended, they
would have been entitled to sue the shipowners for the damage to
the goods in contract under the bill of lading, and no question of
any separate duty of care in tort would have arisen. In the
events which occurred, however, what had originally been a usual
kind of c. and f. contract of sale had been varied so as to
become, in effect, a contract of sale ex-warehouse at Immingham.
The contract as so varied was, however, unusual in an important
respect. Under an ordinary contract of sale ex-warehouse both the
risk and the property in the goods would pass from the seller to
the buyer at the same time, that time being determined by the
intention of the parties. Under this varied contract, however, the
risk had already passed to the buyers on shipment because of the
original c. and f. terms, and there was nothing in the new terms
which caused it to revert to the sellers. The buyers, however, did
not acquire any rights of suit under the bill of lading by virtue of
section 1 of the Bills of Lading Act 1855. This was because,
owing to the sellers' reservation of the right of disposal of the
goods, the property in the goods did not pass to the buyers upon
or by reason of the endorsement of the bill of lading, but only
upon payment of the purchase price by the buyers to the sellers
after the goods had been discharged and warehoused at
Immingham. Hence the attempt of the buyers to establish a
separate claim against the shipowners founded in the tort of
negligence.

My Lords, there is a long line of authority for a principle
of law that, in order to enable a person to claim in negligence for
loss caused to him by reason of loss of or damage to property, he
must have had either the legal ownership of or a possessory title
to the property concerned at the time when the loss or damage
occurred, and it is not enough for him to have only had



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contractual rights in relation to such property which have been
adversely affected by the loss of or damage to it. The line of
authority to which I have referred includes the following cases:
Cattle v. Stockton Waterworks Co. (1875) LR 10 QB 453
(contractor doing work on another's land unable to recover from a
waterworks company loss suffered by him by reason of that
company's want of care in causing or permitting water to leak
from a water pipe laid and owned by it on the land concerned);
Simpson & Co. v. Thomson (1877) 3 App. Case 279 (insurers of two
ships A and B, both owned by C, unable to recover from C loss
caused to them by want of care in the navigation of ship A in
consequence of which she collided with and damaged ship B);
Societe Anonyme de Remorquage a Helice v. Bennetts [1911] 1
K.B. 243 (tug owners engaged to tow ship A unable to recover
from owners of ship B loss of towage remuneration caused to them
by want of care in the navigation of ship B in consequence of
which she collided with and sank ship A); Chargeurs Reunis
Compagnie Francaise de Navigation a Vapeur v. English A
American Steamship Co. (1921) 9 Ll.L. R. 464 (time charterer of
ship A unable to recover from owners of ship B loss caused to
them by want of care in the navigation of ship B in consequence
of which she collided with and damaged ship A); The World
Harmony [1967] 341 (same as preceding case). The principle of
law referred to is further supported by the observations of
Scrutton L.J. in Elliott Steam Tug Co. Ltd, v. The Shipping
Controller [1922] 1 K.B. 127, 139-140.

None of these cases concerns a claim by c.i.f. or c. and f.
buyers of goods to recover from the owners of the ship in which
the goods are carried loss suffered by reason of want of care in
the carriage of the goods resulting in their being lost or damaged
at a time when the risk in the goods, but not yet the legal
property in them, has passed to such buyers. The question
whether such a claim would lie, however, came up for decision in
Margarine Union G.m.b.H_ v. Cambay Prince Steamship Co. Ltd.
(The Wear Breeze) [1969] 1 Q.B. 219. In that case c.i.f. buyers
had accepted four delivery orders in respect of as yet undivided
portions of a cargo of copra in bulk shipped under two bills of
lading. It was common ground that, by doing so, they did not
acquire either the legal property in, nor a possessory title to, the
portions of copra concerned: they only acquired the legal property
later when four portions each of 500 tons were separated from the
bulk on or shortly after discharge in Hamburg. The copra having
been damaged by want of care by the shipowners' servants or
agents in not properly fumigating the holds of the carrying ship
before loading, the question arose whether the buyers were entitled
to recover from the shipowners in tort for negligence the loss
which they had suffered by reason of the copra having been so
damaged. Roskill J. held that they were not, founding his decision
largely on the principle of law established by the line of authority
to which I have referred. He derived further support for his
decision by reference to Brandt v. Liverpool, Brazil and River
Plate Steam Navigation Co. Ltd. [1924] 1 K.B. 575. In that case
it was held by the Court of Appeal that, although the plaintiffs
could not bring themselves within section 1 of the Bills of Lading
Act 1355 because they were neither consignees named in nor
endorsees of bills of ladings relating to goods carried in the
defendant shipowners' ship, nevertheless a contract between the
plaintiffs and the defendants on the terms of the bills of lading



- 4 -

could be implied from the fact that the plaintiffs had themselves
presented the bills of lading to, and obtained delivery of the goods
to which they related from, the ship at the port of discharge; and,
secondly, that the plaintiffs were entitled to sue the defendants
under such implied contract for loss suffered by them by reason of
the want of care of the defendants in the carriage of the goods.
Roskill 3. asked himself the rhetorical question why, if the
plaintiffs had a right to sue the defendants in tort for negligence,
should there have been any reason or need for implying a contract
between them.

My Lords, counsel for the buyers, Mr. Anthony Clarke, Q.C.,
did not question any of the cases in the long line of authority to
which I have referred except The Wear Breeze. He felt obliged to
accept the continuing correctness of the rest of the cases ("the
other non-recovery cases") because of the recent decision of the
Privy Council in Candlewood Navigation Corporation v. Mitsui
O.S.K. Lines Ltd. (The Mineral Transporter) [1986] A.C.1, in which
those cases were again approved and applied, and to which it will
be necessary for me to refer more fully later. He contended,
however, that The Wear Breeze [1969] 1 Q.B. 269 was either
wrongly decided at the time, or at any rate should be regarded as
wrongly decided today, and should accordingly be overruled.

In support of this contention Mr. Clarke relied on five main
grounds. The first ground was that the characteristics of a c.i.f.
or c. and f. contract for sale differed materially from the
characteristics of the contracts concerned in tine other non-
recovery cases. The second ground was that under a c.i.f. or c.
and f. contract the buyer acquired immediately on shipment of the
goods the equitable ownership of them. The third ground was that
the law of negligence had developed significantly since 1969 when
The Wear Breeze was decided, in particular as a result of the
decisions of your Lordships' House in Anns v. Merton London
Borough Council [1975] A.C. 728 and Junior Books Ltd, v. Veitchi
Co. Ltd. [1983] 1 AC 520. In this connection reliance was placed
on two decisions at first instance in which The Wear, Breeze [1969]
1 G.B. 269 had either not been followed or treated as no longer
being good law. The fourth ground was that any rational system
of law would provide a remedy for persons who suffered the kind
of loss which the buyers suffered in the present case. The fifth
ground was the judgment of Goff L.J. in the present case, so far
as it related to the buyers' right to sue the shipowners in tort for
negligence. I shall examine each of these grounds in turn.

Ground (1): difference in characteristics of a c.i.f. or c. and f.

contract




My Lords, under this head Mr. Clarke said that in the other
non-recovery cases the plaintiffs who failed were not persons who
had contracted to buy the property to which the defendants' want
of care had caused loss or damage; they were rather persons
whose contractual rights entitled them either to have the use or
services of the property concerned and thereby made profits (e.g.
the time charter cases), or to render services to the property
concerned and thereby earn remuneration (e.g. the towage cases).
By contrast buyers under a c.i.f. or c. and f. contract of sale
were persons to whom it was intended that the legal ownership of
the goods should later pass, and who were therefore prospectively,
though not presently, the legal owners of them.

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I recognise that this difference in the characteristics of a
c.i.f. or c. and f. contract of sale exists, but I cannot see why it
should of itself make any difference to the principle of law to be
applied. In all these cases what the plaintiffs are complaining of
is that, by reason of their contracts with others, loss of or
damage to property, to which, when it occurred, they had neither
a proprietary nor a possessory title, has caused them to suffer
loss: and the circumstance that, in the case of c.i.f. or c. and f.
buyers, they are, If the contract of sale is duly completed,
destined later to acquire legal ownership of the goods after the
loss or damage has occurred, does not seem to me to constitute a
material distinction in law.

Ground (2); equitable ownership

My Lords, under this head Mr. Clarke put forward two
propositions of law. The first proposition was that a person who
has the equitable ownership of goods is entitled to sue in tort for
negligence anyone who by want of care causes them to be lost or
damaged without joining the legal owner as a party to the action.
The second proposition was that a buyer who agrees to buy goods
in circumstances where, although ascertained goods have been
appropriated to the contract, their legal ownership remains in the
seller, acquires upon such appropriation the equitable ownership of
the goods. Applying those two propositions to the facts of the
present case, Mr. Clarke submitted that the goods the subject-
matter of the c. and f. contract had been appropriated to the
contract on or before shipment at Inchon, and that from then on,
while the legal ownership of the goods remained in the sellers, the
buyers became the equitable owners of them, and could therefore
sue the shipowners in tort for negligence for the damage done to
them without joining the sellers.

In my view, the first proposition cannot be supported.
There may be cases where a person who is the equitable owner of
certain goods has also a possessory title to them. In such a case
he is entitled, by virtue of his possessory title rather than his
equitable ownership, to sue in tort for negligence anyone whose
want of care has caused loss of or damage to the goods without
joining the legal owner as a party to the action: see for instance
Healey v. Healey [1915] 1 K.B. 938. If, however, the person is
the equitable owner of the goods and no more, then he must join
the legal owner as a party to the action, either as co-plaintiff if
he is willing or as co-defendant if he is not. This has always
been the law in the field of equitable ownership of land and I see
no reason why it should not also be so in the field of equitable
ownership of goods.

With regard to the second proposition, I do not doubt that it
is possible, in accordance with established equitable principles, for
equitable interests in goods to be created and to exist. It seems
to me, however, extremely doubtful whether equitable interests in
goods can be created or exist within the confines of an ordinary
contract of sale. The Sale of Goods Act 1893, which must be
taken to apply to the c. and f. contract of sale in the present
case, is a complete code of law In respect of contracts for the
sale of goods. The passing of the property in goods the subject-
matter of such a contract is fully dealt with in sections 16 to 19



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of the Act. Those sections draw no distinction between the legal
and the equitable property in goods, but appear to nave been
framed on the basis that the expression "property", as used in
them, is intended to comprise both the legal and the equitable
title. In this connection I consider that there is much force in
the observations of Atkin L.J. in In re Wait [1927] 1 Ch. 606, 635-
636, from which I quote only this short passage:

"It would have been futile in a code intended for
commercial men to have created an elaborate structure of
rules dealing with rights at law, if at the same time it was
intended to leave, subsisting with the legal rights, equitable
rights inconsistent with, more extensive, and coming into
existence earlier than the rights so carefully set out in the
various sections of the Code."

These observations of Atkin L.J. were not necessary to the
decision of the case before him and represented a minority view
not shared by the other two members of the Court of Appeal.
Moreover, Atkin L.J. expressly stated that he was not deciding the
point. If my view on the first proposition of law is correct, it is
again unnecessary to decide the point in this appeal. I shall,
therefore, say no more than that my provisional view accords with
that expressed by Atkin L.J. in In re Wait [1927] 1 Ch. 616, 635-
636.

Ground (3); development of the law of negligence since 1969

My Lords, under this head Mr. Clarke relied principally on
the well known passage in the speech of Lord Wilberforce in Anns
v. Merton London Borough Council [1978] AC 728, 751-752. That
passage reads:

"Through the trilogy of cases in this House - Donoghue v.
Stevenson [1932] AC 562, Medley Byrne & Co. Ltd, v.
Heller & Partners Ltd. [1964] AC 465, and Dorset Yacht
Co. Ltd, v. Home Office [1970] AC 1004, the position has
now been reached that in order to establish that a duty of
care arises in any particular situation, it is not necessary to
bring the facts of that situation within those of previous
situations in which a duty of care has been held to exist.
Rather the question has to be approached in two stages.
First one has to ask whether, as between the alleged
wrongdoer and the person who has suffered damage there is
a sufficient relationship of proximity or neighbourhood such
that, in the reasonable contemplation of the former,
carelessness on his part may be likely to cause damage to
the latter - in which case a prima facie duty of care arises.
Secondly, if the first question is answered affirmatively, it
is necessary to consider whether there are any
considerations which ought to negative, or to reduce or limit
the scope of the duty or the class of person to whom it is
owed or the damages to which a breach of it may give rise.

Mr. Clarke submitted that the proper way for your Lordships
to approach the present case was to ask and answer the two
questions set out by Lord Wilberforce in that passage. He said
that the answer to the first question must be that there was, as



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between the shipowners and the buyers, a sufficient relationship of
proximity or neighbourhood such that, in the reasonable
contemplation of the former, want of care on their part might be
likely to cause damage in the form of pecuniary loss to the latter,
so that a prima facie duty of care arises. With regard to the
second question, relating to considerations which ought to limit the
scope of the duty, he conceded that it would be unjust to the
shipowners to be liable to the buyers in tort for negligence
without reference to the terms of the bills of lading under which
the shipowner carried the goods; and he sought to find a. legal
rationale for the qualification of the duty of care by reference to
those terms on the basis that those were the terms of the
bailment of the goods by the sellers to the shipowners to which
the buyers had, by entering into a c. and f. contract with the
sellers, impliedly consented.

Before examining these submissions it will be convenient to
refer to two decisions at first instance relating to the question of
law raised by this appeal, both made alter the decision of your
Lordships' House in Anns' case [1978] AC 728 and on the basis of
the passage of Lord Wilberforce's speech in that case which I have
set out above. The reasoning in those two cases, as will become
apparent, tended to go further than Mr. Clarke has sought to
persuade your Lordships to go in the present case.

The first decision is that of Lloyd 3. in Schiffahrt-und
Kohlen G.m.b.H. v. Chelsea Maritime Ltd. (The Irene's Success)
[1982] Q.B. 481. In that case the plaintiffs were c.i.f. buyers of a
complete cargo of coaking coal carried in the defendants' ship,
The Irene's Success, from Norfolk, Virginia, to Hamburg. During
the voyage the cargo was damaged by sea water and the plaintiffs
alleged that the damage had been caused by want of care by the
shipowners. The plaintiffs could not sue the shipowners in
contract because they never became holders of the bill of lading,
and they therefore sued them in tort for negligence on the basis
that, although they were not the legal owners of the cargo when
the damage was done, it was nevertheless at their risk at that
time. A preliminary question of law was tried as to whether the
plaintiffs were entitled to sue the shipowners in tort for
negligence. Both counsel appear to have agreed that the question
so raised fell to be determined by reference to Lord Wilberforce's
two questions in Anns' case [1978] AC 728, and Lloyd J. had no
hesitation in acting on that agreement. He answered Lord
Wilberforce's first question in the affirmative, on the basis that
the incidence of risk under a c.i.f. contract was or ought to be
well known to shipowners. With regard to the second question he
said, at p. 486:

"Another possible ground of policy for excluding the duty of
care in the case of a c.i.f. buyer might be if it enabled him
to sidestep the carrier's contractual exceptions, including,
for instance, the rights and immunities conferred on him by
the Hague Rules. It is difficult to know how far that
argument would carry the defendants, since the point was
not canvassed at the hearing. But if I may express my own
tentative view, it would be that it would require a much
stronger argument of policy for the duty of care in the
present case, arising out of so close a relationship as that
which exists between a carrier and a c.i.f. buyer, to be
excluded."

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As I have already indicated, Mr. Clarke, while resisting any
suggestion that the question of policy- referred to by Lloyd 3.
should exclude a duty of care altogether, accepted that it would
be just for such duty to be qualified by the terms of the relevant
bill of lading.

The second decision is that of Sheen 3. in The "Nea Tyhi"
[1982] 1 Lloyd's Rep. 606. In that case the plaintiffs were the
endorsees of bills of lading relating to a part cargo of plywood
carried in the defendants' ship, the Nea Tyhi, from Port Kelang to
Newport. The plywood having been stowed on deck and damaged
during the voyage, the plaintiffs sued the defendants for the
damage both in contract on the bills of lading and in tort for
negligence. Sheen 3. found for the plaintiffs' claim in contract
and did not therefore need to reach a decision on their alternative
claim in tort. He indicated, however, that, if it had been
necessary for him to do so, he would, in relation to the question
of title to sue, have followed The Irene's Success [1982] Q.B. 481
rather than The Wear Breeze [1969] 1 Q.B. 219 for the reasons
given by Lloyd 3. in the former case. He went on to say that
Lloyd J.'s decision had the advantage, in a case where the legal
ownership of the goods passed while they were still afloat, and
damage was done to them progressively during the voyage, of
obviating the need for a difficult inquiry into how much of the
damage occurred before, and how much after, the time when the
ownership passed.

Having referred to these two cases I now return to consider
Mr. Clarke's submissions based on what Lord Wilberforce said in
Anns' case [1978] AC 728. There are two preliminary
observations which I think that it is necessary to make with regard
to the passage in Lord Wilberforce's speech on which counsel
relies. The first observation which I would make is that that
passage does not provide, and cannot in my view have been
intended by Lord Wilberforce to provide, a universally applicable
test of the existence and scope of a duty of care in the law of
negligence. In this connection I would draw attention to a passage
in the speech of my noble and learned friend, Lord Keith of
Kinkel, in Governors of the Peabody Donation Fund v. Sir Lindsay
Parkinson & Co. Ltd. [1985] AC 210. After citing a passage
from Lord Reid's speech in The Dorset Yacht Co. case [1970] A.C.
1004, 1027 and then the passage from Lord Wilberforce’s speech in
Anns' case [1978] AC 728, 751-752 now under discussion, he said,
at p.240:

"There has been a tendency in some recent cases to treat
these passages as being of themselves of a definitive
character. This is a temptation which should be resisted."

The second observation which I would make is that Lord
Wilberforce was dealing, as is clear from what he said, with the
approach to the questions of the existence and scope of a duty of
care in a novel type of factual situation which was not analagous
to any factual situation in which the existence of such a duty had
already been held to exist. He was not, as I understand the
passage, suggesting that the same approach should be adopted to
the existence of a duty of care in a factual situation in which the
existence of such a duty had repeatedly been held not to exist.

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It is at this point that I think it is helpful to examine The
Mineral Transporter [1986] A.C.I, which I mentioned earlier. The
facts of that case were familiar enough. A collision took place
between ships A and B solely by reason of want of care in the
navigation of ship B. As a result of the collision ship A was
damaged and had to be repaired, and during the period of repair
the first plaintiff, who was the time charterer of ship A, suffered
loss in the form of wasted payments of hire and loss of profits.
The Supreme Court of New South Wales held that the first
plaintiff was entitled to recover his loss from the owners of ship
B. On appeal to the Privy Council that decision was reversed and
it was held that the first plaintiff had no right of suit in respect
of his loss. It was urged on the Board that the rule against
admitting claims for loss arising solely from a contractual
relationship between a plaintiff and the victim of a negligent third
party could no longer be supported, and that it was enough that
the loss was a direct result of a wrongful act and that it was
foreseeable. The judgment of the Board was given by Lord Fraser
of Tullybelton who rejected this contention. He made a full
examination of the long line of English authority to which I
referred earlier, and also of certain Scottish, Australian, Canadian
and American decisions. He expressed the conclusion of the Board
at p. 25 as follows:

"Their Lordships consider that some limit or control
mechanism has to be imposed upon the liability of a
wrongdoer towards those who have suffered economic
damage in consequence of his negligence , . . The common
law limitation which has been generally accepted is that
stated by Scrutton L.3. in Elliott Steam Tug Co. Ltd, v.
Shipping Controller [1922] 1 K.B. 127, 139-140 ... Not only
has the rule been generally accepted in many countries
including the United Kingdom, Canada, the United States of
America and until now Australia, but it has the merit of
drawing a definite and ascertainable line. It should enable
legal practitioners to advise their clients as to their rights
with reasonable certainty, and their Lordships are not aware
of any widespread dissatisfaction with the rule. These
considerations operate to limit the scope of the duty owed
by a wrongdoer, and they do so at the second stage
mentioned by Lord Wilberforce in the passage cited above
from his speech in Anns v. Merton Borough Council [1978]
A.C. 728, 751-752."

Although, as I indicated earlier, I do not think that Lord
Wilberforce, in formulating the two questions which he did
formulate in his speech in Anns' case, was intending them to be
used as a means of re-opening issues relating to the existence of a
duty of care long settled by past decisions, it will be observed
that in The Mineral Transporter [1986] AC 1 the Privy Council
was content to test the first plaintiffs' liability by reference to
those two questions, and to exclude a duty of care on the basis of
the answer given to the second question.

Mr. Clarke said, rightly in my view, that the policy reason
for excluding a duty of care in cases like The Mineral Transporter
and what I earlier called the other non-recovery cases was to
avoid the opening of the floodgates so as to expose a person guilty
of want of care to unlimited liability to an indefinite number of



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other persons whose contractual rights have been adversely
affected by such want of care. Mr. Clarke went on to argue that
recognition by the law of a duty of care owed by shipowners to a
c.i.f. or c. and f. buyer, to whom the risk but not yet the
property in the goods carried in such shipowners' ship has passed,
would not of itself open any floodgates of the kind described. It
would, he said, only create a strictly limited exception to the
general rule, based on the circumstance that the considerations of
policy on which that general rule was founded did not apply to
that particular case. I do not accept that argument. If an
exception to the general rule were to be made in the field of
carriage by sea, it would no doubt have to be extended to the
field of carriage by land, and I do not think that it is possible to
say that no undue increase in the scope of a person's liability for
want of care would follow. In any event, where a general rule,
which is simple to understand and easy to apply, has been
established by a long line of authority over many years, I do not
think that the law should allow special pleading in a particular
case within the general rule to detract from its application. If
such detraction were to be permitted in one particular case, it
would lead to attempts to have it permitted in a variety of other
particular cases, and the result would be that the certainty, which
the application of the general rule presently provides, would be
seriously undermined. Yet certainty of the law is of the utmost
importance, especially but by no means only, in commercial
matters. I therefore think that the general rule, re-affirmed as it
has been so recently by the Privy Council in The Mineral
Transporter [1986] AC 1, ought to apply to a case like the
present one, and that there is nothing in what Lord Wilberforce
said in Anns' case [1973] A.C. 728 which would compel a different
conclusion.

Mr. Clarke sought to rely also on Junior Books Ltd, v.
Veitchi Co. Ltd. [1983] 1 AC 520. That was a case in which it
was held by a majority of your Lordships' House that, when a
nominated sub-contractor was employed by a head contractor under
the standard form of R.I.B.A. building contract, the sub-contractor
was not only under a contractual obligation to the head contractor,
under the sub-contract between them, not to lay a defective
factory floor, but also owed a duty of care in tort to the building
owner not to do so and thereby cause him economic loss. The
decision is of no direct help to the buyers in the present case, for
the plaintiffs who were held to have a good cause of action in
negligence in respect of a defective floor were the legal owners of
it. But Mr. Clarke relied on certain observations in the speech of
Lord Roskill as supporting the proposition that a duty of care in
tort might, as he submitted it should be in the present case, be
qualified by reference to the terms of a contract to which the
defendant was not a party. In this connection Lord Roskill said,
at p. 546:

"During the argument it was asked what the position would
be in a case when there was a relevant exclusion clause in
the main contract. My Lords, that question does not arise
for decision in the instant appeal, but in principle I would
venture the view that such a claim according to the manner
in which it was worded might in some circumstances limit
the duty of care just as in the Hedley Byrne case the
plaintiffs were ultimately defeated by the defendants'
disclaimer of responsibility."

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As is apparent this observation was no more than an obiter
dictum Moreover, with great respect to Lord Roskill there is no
analogy between the disclaimer in the Hedley Byrne case [1964]
A.C. 465 which operated directly between the plaintiffs and the
defendants, and an exclusion of liability clause in a contract to
which the plaintiff is a party but the defendant is not. I do not
therefore find in the observation of Lord Roskill relied on any
convincing legal basis for qualifying a duty of care owed by A to
B by reference to a contract to which A is, but B is not, a party.

As I said earlier, Mr. Clarke submitted that your Lordships
should hold that a duty of care did exist in the present case, but
that it was subject to the terms of the bill of lading. With
regard to this suggestion Sir John Donaldson M.R. said in the
present case [1935] 2 W.L.R. 289 at p. 301:

"I "have, of course, considered whether any duty of care in
tort to the buyer could in some way be equated to the
contractual duty of care owed to the shipper, but . do not
see how this could be done. The commonest form of
carriage by sea is one on the terms of the Hague Rules.
But this is an intricate blend of responsibilities and
liabilities (Article III), right and immunities (Article IV),
limitations in the amount of damages recoverable (Article
IV, r.5), time bars (Article III, r.6), evidential provisions
(Article III, rr.4 and 6), indemnities (Article III, r.5 and
Article IV, r.6) and liberties (Article IV, rr,4 and 6). I am
quite unable to see how these can be synthesised into a
standard of care."

I find myself suffering from the same inability to understand how
the necessary synthesis could be made as the learned Master of
the Rolls.

As I also said earlier, Mr. Clarke sought to rely on the
concept of a bailment on terms as a legal basis for qualifying the
duty of care for which he contended by reference to the terms of
the bill of lading. He argued that the buyers, by entering into a
c. and f. contract with the sellers, had impliedly consented to the
sellers bailing the goods to the shipowners on the terms of a usual
bill of lading which would include a paramount clause incorporating
the Hague Rules. I do not consider that this theory is sound.
The only bailment of the goods was one by the sellers to the
shipowners. That bailment was certainly on the terms of a usual
bill of lading incorporating the Hague Rules. But, so long as the
sellers remained the bailors, those terms only had effect as
between the sellers and the shipowners. If the shipowners as
bailors had ever attorned to the buyers, so that they became the
bailors in place of the sellers, the terms of the bailment would
then have taken effect as between the shipowners and the buyers.
Because of what happened, however, the bill of lading never was
negotiated by the sellers to the buyers and no attornment by the
shipowners ever took place. I would add that, if the argument for
the buyers on terms of bailment were correct, there would never
have been any need for the Bills of Lading Act 1855 or for the
decision of the Court of Appeal in Brandt v. Liverpool, Brazil and
River Plate Steam Navigation Co. Ltd. [1924] 1 K.B. 575 to which
I referred earlier.

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Ground (4); the requirements of a rational system of law

My Lords, under this head Mr. Clarke submitted that any
rational system of law ought to provide a remedy for persons who
suffered the kind of loss which the buyers suffered in the present
case, with the clear implication that, if your Lordships' House
were to hold that the remedy for which he contended was not
available, it would be lending its authority to an irrational feature
of English law. I do not agree with this submission for, as I shall
endeavour to show, English law does, in all normal cases, provide a
fair and adequate remedy for loss of or damage to goods the
subject-matter of a c.i.f. or c. and f. contract, and the buyers in
this case could easily, if properly advised at the time when they
agreed to the variation of the original c. and f. contract, have
secured to themselves the benefit of such a remedy.

As I indicated earlier, under the usual c.i.f. or c. and f.
contract the bill of lading issued in respect of the goods is
endorsed and delivered by the seller to the buyer against payment
by the buyer of the price. When that happens, the property in the
goods passes from the sellers to the buyers upon or by reason of
such endorsement, and the buyer is entitled, by virtue of section 1
of the Bills of Lading Act 1855, to sue the shipowners for loss of
or damage to the goods on the contract contained in the bill of
lading. The remedy so available to the buyer is adequate and fair
to both parties, and there is no need for any parallel or .
alternative remedy in tort for negligence. In the present case, as
I also indicated earlier, the variation of the original c. and f.
contract agreed between the sellers and the buyers produced a
hybrid contract of an extremely unusual character. It was
extremely unusual in that what had originally been an ordinary c.
and f. contract became, in effect, a sale ex-warehouse at
Immingham, but the risk in the goods during their carriage by sea
remained with the buyers as if the sale had still been or. a c. and
f. basis. In this situation the persons who had a right to sue the
shipowners for loss of or damage to the goods on the contract
contained in the bill of lading were the sellers, and the buyers, if
properly advised, should have made it a further term of the
variation that the sellers should either exercise this right for their
account (see The Albazero [1977] A.C. 774) or assign such right to
them to exercise for themselves. If either of these two
precautions had been taken, the law would have provided the
buyers with a fair and adequate remedy for their loss.

These considerations show, in my opinion, not that there is
some lacuna in English law relating to these matters, but only that
the buyers, when they agreed to the variation of the original
contract of sale, did not take the steps to protect themselves
which, if properly advised, they should have done. To put the
matter quite simply the buyers, by the variation to which they
agreed, were depriving themselves of the right of suit under
section 1 of the Bills of Lading Act 1855 which they would
otherwise have had, and commercial good sense required that they
should obtain the benefit of an equivalent right in one or other of
the two different ways which I have suggested.

Ground (5): the judgment of Goff L.J.

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My Lords, after a full examination of numerous authorities
relating to the law of negligence Goff L.J. (now Lord Goff of
Chieveley) said [1985] 2 W.L.R. 289, 330:

"In my judgment, there is no good reason in principle or in
policy, why the c. and f. buyer should not have ... a
direct cause of action. The factors which I have already
listed point strongly towards liability. I am particularly
influenced by the fact that the loss in question is of a
character which will ordinarily fall on the goods owner who
will have a good claim against the shipowner, but in a case
such as the present the loss may, in practical terms, fall on
the buyer. If seems to me that the policy reasons pointing
towards a direct right of action by the buyer against the
shipowner in a case of this kind outweigh the policy reasons
which generally preclude recovery for purely economic loss.
There is here no question of any wide or indeterminate
liability being imposed on wrongdoers; on the contrary, the
shipowner is simply held liable to the buyer in damages for
loss for which he would ordinarily be liable to the goods
owner. There is a recognised principle underlying the
imposition of liability, which can be called the principle of
transferred loss. Furthermore, that principle can be
formulated. For the purposes of the present case, I would
formulate it in the following deliberately narrow terms,
while recognising that it may require modification in the
light of experience. Where A owes a duty of care in tort
not to cause physical damage to B's property, and commits
a breach of that duty in circumstances in which the loss of
or physical damage to the property will ordinarily fall on B
but (as is reasonably foreseable by A) such loss or damage,
by reason of a contractual relationship between B and C,
falls upon C, then C will be entitled, subject to the terms
of any contract restricting A's liability to B, to bring an
action in tort against A in respect of such loss or damage
to the extent that it falls on him, C. To that proposition
there must be exceptions. In particular, there must, for the
reasons I have given, be an exception in the case of
contracts of insurance. I have also attempted so to draw
the principle as to exclude the case of the time charterer
who remains liable for hire for the chartered ship while
under repair following collision damage, though this could if
necessary be treated as another exception having regard to
the present state of the authorities."

With the greatest possible respect to Lord Goff the principle
of transferred loss which he there enunciated, however useful in
dealing with special factual situations it may be in theory, is not
only not supported by authority, but is on the contrary inconsistent
with it. Even if it were necessary to introduce such a principle in
order to fill a genuine lacuna in the law, I should myself, perhaps
because am more faint-hearted than Lord Goff, be reluctant to
do so. As I have tried to show earlier, however, there is in truth
no such lacuna in the law which requires to be filled. Neither Sir
John Donaldson M.R. nor Oliver L.J. (now Lord Oliver of
Aylmerton) was prepared to accept the introduction of such a
principle and I find myself entirely in agreement with their
unwillingness to do so.

- 14 -

My Lords, I have now examined and rejected all the five
grounds on which Mr. Clarke relied in support of his contention
that The Wear Breeze [1969] 1 Q.B. 219 was either wrongly decided
at the time, or at any rate should be regarded as wrongly decided
today, and should accordingly be overruled. The conclusion which I
have reached is that The Wear Breeze was good law at the time
when it was decided and remains good law today. It follows that
I consider that the decision of Lloyd J. in The Irene's Success
[1982] Q.B. 481, which even Mr. Clarke did not seek to support in
its entirety, was wrong and should be overruled, and the
observations of Sheen J. with regard to it in the The Nea Tyhi
[1982] 1 Lloyd's Rep. 606 should be disapproved.

My Lords, if I had reached a different conclusion on the
main question of the existence of a duty of care, and held that
such a duty of care, qualified by the terms of the bill of lading,
did exist, it would have been necessary to consider the further
question whether, on the rather special facts of this case, the
shipowners committed any breach of such duty. As it is, however,
an answer to that further question is not required.

For the reasons which I have given, I would affirm the
decision of the Court of Appeal and dismiss the appeal with costs.

LORD BRIGHTMAN

My Lords,

For the reasons contained in the speech of my noble and
learned friend, Lord Brandon of Oakbrook, I also would dismiss this
appeal.

LORD GRIFFITHS
My Lords,

For the reasons contained in the speech of my noble and
learned friend, Lord Brandon of Oakbrook, I also would dismiss this
appeal.

LORD ACKNER

My Lords,

I have had the advantage of reading in draft the speech of
my noble and learned friend, Lord Brandon of Oakbrook, and for
the reasons which he gives I too would dismiss this appeal.

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